Dynamic analysis of the determinants of long-term microfinance interest rates: Macro and micro factors
INTRODUCTION: A recent increase in interest rates has raised doubts about the stability of micro-finance institutions (MFI) A recent increase in interest rates has raised doubts about the stability of MFI in many countries. This has compelled governments to consider some MFI practices unethical. MET...
Autores principales: | , , , , , |
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Formato: | Online Artículo Texto |
Lenguaje: | English |
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Frontiers Media S.A.
2022
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Acceso en línea: | https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9748690/ https://www.ncbi.nlm.nih.gov/pubmed/36533025 http://dx.doi.org/10.3389/fpsyg.2022.1008002 |
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author | Rauf, Fawad Wanqiu, Wang Jing, Li Qadri, Syed Usman Naveed, Khwaja Rahman, Shams U. |
author_facet | Rauf, Fawad Wanqiu, Wang Jing, Li Qadri, Syed Usman Naveed, Khwaja Rahman, Shams U. |
author_sort | Rauf, Fawad |
collection | PubMed |
description | INTRODUCTION: A recent increase in interest rates has raised doubts about the stability of micro-finance institutions (MFI) A recent increase in interest rates has raised doubts about the stability of MFI in many countries. This has compelled governments to consider some MFI practices unethical. METHODS: This paper studies the MFI interest rates by using a dynamic panel method to identify the determining factors of the viability, financial, and social execution of microfinance firms. The research shows that the long-term interest rate evolution depends on the anticipation of loan loss rates (LLR), profit, or macroeconomic factors like inflation and the short-term current interest rate. The Study used database of 897 microfinance institutions in 106 countries and six geographic regions with a representative sample size of 5,075 observations between 2008 and 2020. The external factors considered are the market structure (Competition), economics (inflation), cultural and technological political conditions, and banking regulations in effect (regulation). Financial costs, operational costs, the write-off rate, and the average size of the loan are the most important determinant factors in MFI interest rate fluctuations. RESULTS: The research find that other factors like gender, legal status, and regulations also contribute to the MFI interest rate variation. The research also discovered that there is a threshold effect in the relationship between women borrowers (WB) and the interest rate. Another important finding of this study is that MFIs do not anticipate inflation in the definition of the interest rate. DISCUSSION: From an institutional point of view, it is necessary to promote competition, as the study shows that well-regulated competition helps to keep interest rates at a reasonable level. |
format | Online Article Text |
id | pubmed-9748690 |
institution | National Center for Biotechnology Information |
language | English |
publishDate | 2022 |
publisher | Frontiers Media S.A. |
record_format | MEDLINE/PubMed |
spelling | pubmed-97486902022-12-15 Dynamic analysis of the determinants of long-term microfinance interest rates: Macro and micro factors Rauf, Fawad Wanqiu, Wang Jing, Li Qadri, Syed Usman Naveed, Khwaja Rahman, Shams U. Front Psychol Psychology INTRODUCTION: A recent increase in interest rates has raised doubts about the stability of micro-finance institutions (MFI) A recent increase in interest rates has raised doubts about the stability of MFI in many countries. This has compelled governments to consider some MFI practices unethical. METHODS: This paper studies the MFI interest rates by using a dynamic panel method to identify the determining factors of the viability, financial, and social execution of microfinance firms. The research shows that the long-term interest rate evolution depends on the anticipation of loan loss rates (LLR), profit, or macroeconomic factors like inflation and the short-term current interest rate. The Study used database of 897 microfinance institutions in 106 countries and six geographic regions with a representative sample size of 5,075 observations between 2008 and 2020. The external factors considered are the market structure (Competition), economics (inflation), cultural and technological political conditions, and banking regulations in effect (regulation). Financial costs, operational costs, the write-off rate, and the average size of the loan are the most important determinant factors in MFI interest rate fluctuations. RESULTS: The research find that other factors like gender, legal status, and regulations also contribute to the MFI interest rate variation. The research also discovered that there is a threshold effect in the relationship between women borrowers (WB) and the interest rate. Another important finding of this study is that MFIs do not anticipate inflation in the definition of the interest rate. DISCUSSION: From an institutional point of view, it is necessary to promote competition, as the study shows that well-regulated competition helps to keep interest rates at a reasonable level. Frontiers Media S.A. 2022-11-30 /pmc/articles/PMC9748690/ /pubmed/36533025 http://dx.doi.org/10.3389/fpsyg.2022.1008002 Text en Copyright © 2022 Rauf, Wanqiu, Jing, Qadri, Naveed and Rahman. https://creativecommons.org/licenses/by/4.0/This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY). The use, distribution or reproduction in other forums is permitted, provided the original author(s) and the copyright owner(s) are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms. |
spellingShingle | Psychology Rauf, Fawad Wanqiu, Wang Jing, Li Qadri, Syed Usman Naveed, Khwaja Rahman, Shams U. Dynamic analysis of the determinants of long-term microfinance interest rates: Macro and micro factors |
title | Dynamic analysis of the determinants of long-term microfinance interest rates: Macro and micro factors |
title_full | Dynamic analysis of the determinants of long-term microfinance interest rates: Macro and micro factors |
title_fullStr | Dynamic analysis of the determinants of long-term microfinance interest rates: Macro and micro factors |
title_full_unstemmed | Dynamic analysis of the determinants of long-term microfinance interest rates: Macro and micro factors |
title_short | Dynamic analysis of the determinants of long-term microfinance interest rates: Macro and micro factors |
title_sort | dynamic analysis of the determinants of long-term microfinance interest rates: macro and micro factors |
topic | Psychology |
url | https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9748690/ https://www.ncbi.nlm.nih.gov/pubmed/36533025 http://dx.doi.org/10.3389/fpsyg.2022.1008002 |
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